The GDP growth rate of 4.4 per cent in Q3 is not just lower on a year-on-year basis but also on sequential basis giving an impression the recovery has become shallower. However, the government does not agree with this kind of comparison between the revised estimate and the advance estimate. DK Srivastava, EY’s Chief Economic Advisor, spoke with businessline to clarify the situation. Excerpts:


GDP growth of 4.4 per cent in the October-December quarter as against 5.2 per cent during the corresponding period of the last fiscal indicates that it is slowing down. How do you assess the situation?

Growth has fallen marginally from earlier expectations because RBI had also indicated growth rates for the third and fourth quarters to be in the range of 4.5 to 4.6 per cent. So, it is a marginal slowing down. However, sectorally, it indicates that manufacturing is contracting at minus 1.1 per cent in the third quarter, which is a point of concern. The other point of concern is that public administration, defence, and other services are showing a growth rate of only 2 per cent. These two appear to be the main signals indicating weaknesses of the economy, even after having recovered from the Covid shock.


Do you think the interest rate hike of 250 bps along with the slowdown has affected manufacturing?

Yes, both factors are equally critical, but I would say exports have contributed more to this. If you look at the annual comparison, the contribution of net exports was minus 2.8 per cent earlier. It has now fallen to minus 1.9 per cent. But still, exports have slowed down very substantially, which has contributed to the fall in demand for Indian exports, and therefore, the manufacturing sector is showing reduced capacity utilisation as well as reduced growth.


Since the GDP numbers are revised five times from the first estimate, is it correct to compare the advanced estimate and the revised estimate?

I don’t think we should compare these numbers per se, but we can work out the implications of the advanced estimates if we take into account the information that is provided in the currently revised numbers. So, the implication is rather significant in the sense that if we have to have a 7 per cent growth for the full year, then it would call for a 5.1 per cent growth in the fourth quarter, and that appears to be a little higher than whatever quarterly estimates were provided by the RBI for the fourth quarter. If that fourth-quarter growth also remained subdued, then advanced estimates would prove to be out of line in the sense that we may not be able to reach 7 per cent.


Considering global headwinds, do you see estimates of 7 per cent growth for the current fiscal and over 6 per cent growth for the next fiscal are realistic?

Realistically, in the current fiscal which is FY23, we may possibly get slightly lower than 7 per cent and for the next year, we may not get much more than 6 per cent. The reason is that the government expenditures are not showing a very strong stimulus, although the structure of expenditure in the budget has changed in favor of capital expenditure which has a positive impact, but overall expenditure growth is very limited. And in a period in which private final consumption expenditure is also showing subdued growth and government final consumption expenditure is showing much lower growth, the government needs to intervene by increasing government expenditure. And if that doesn’t come about, then getting even 6 per cent next year may be a challenge.


If we see an expansion of nominal growth for the current fiscal, do we expect that the fiscal deficit will be on the slightly higher side as a percentage of GDP? As against the revised estimate of 6.4 per cent, it could go up to 6.5 per cent?

There may be a marginal impact. It would possibly be some decimal numbers. So, if it is 6.49 per cent, then we would still call it 6.4 per cent. The possibility of slippage exists, but it will be a minimal one.